by Melissa Proctor, Polsinelli, P.C.
On February 22nd, the WTO's multilateral Trade Facilitation Agreement (TFA) formally entered into force, which is expected to usher in new trade facilitation reforms by each of the signatory countries, including the United States. What does this mean for multinational companies and companies eager to expand into global markets? Expect significant regulatory changes ahead! The TFA is intended to reduce regulatory trade requirements, increase transparency in customs procedures, and expedite the international movement, release and clearance of goods around the world. The TFA also calls for increased cooperation between the countries' customs authorities on trade facilitation and compliance issues, and the provision of technical assistance to developing and lesser developed countries. The TFA was opened for ratification by the 164 signatory countries, including the United States, in November 2014 – the agreement required ratification by at least 110 countries before it would go into effect. As of February 22, 2017, a total of 112 countries have ratified the TFA and implemented it into their local laws thereby launching the agreement into force. The WTO estimates that full implementation of the TFA will likely reduce global trade costs by 14.3%, increase imports and exports by up to $1 trillion per year, reduce import clearance times by 47%, and slash export clearance times by 91%. These cost and time savings benefits are expected to dramatically increase global exports and motivate new exporters to expand aggressively into global markets.
Overview of the Agreement
The TFA is divided into three separate sections. Section I focuses on the movement, release and clearance of goods, which includes goods in transit as well as customs cooperation amongst the signatory countries. Developed signatory countries have committed to immediately implement these provisions upon the TFA's entry into force. The trade facilitation measures contemplated under the TFA include:
The release of imported goods before the customs authorities make final determinations and assess duties, fees and taxes;
Expedited customs release for certain air cargo and perishable goods;
Online publication of import and export procedures, and establishing public contact points within the customs and government authorities to respond to inquiries from importers and exporters;
Automated customs processing such as the use of electronic documents, the acceptance of e-payments, and the creation of a single window for effecting customs clearance;
Established methods for calculating customs fees and penalty amounts;
Harmonized processes and standards for customs clearance;
Greater border agency and customs cooperation;
Opportunities for importers and exporters to comment on proposed trade facilitation rules under the TFA, and rights of WTO members to appeal customs administrative decisions; and,
Creation of a Trade Facilitation Agreement Facility (TFAF) to oversee the provision of technical assistance to LDCs in their implementation of TFA provisions.
Section II lays out the Special and Differential Treatment (SDT) provisions that will enable Developing and Least-Developed Countries (LDCs) to determine when they will implement the various provisions of the TFA, and to identify the provisions for which they will need technical assistance and capacity building support for implementation. LDCs are required to prioritize the TFA's provisions into three separate categories according to specified timelines. Category A provisions are those that an LDC agrees to implement on the date of the TFA's entry into force (or within one year thereafter). Category B provisions will be implemented by an LDC after a transitional period following the TFA's entry into force. Category C provisions are those that will require technical assistance and capacity building support, and which will be implemented after a transitional period following the TFA's entry into force. The TFA also allows LDCs to request extensions of time (i.e., of up to 3 years) if they experience difficulties in implementing Category B or C provisions. In addition, the TFA provides a grace period for LDCs in which they will not be subjected to the Dispute Settlement Understanding provisions for a period of 6 years for the implementation of Category A provisions, and 8 years for Category B and C provisions.
Section III of the TFA sets forth the provisions for establishing a permanent WTO trade facilitation committee, and will require members to create national committees to facilitate domestic coordination and implementation of TFA provisions.
Key TFA Takeaways for Multinational Companies
The introduction and implementation of trade facilitation measures under the TFA, such as those described above, will inevitably result in the rollout of new import and export regulations in the signatory countries. Companies will therefore need to stay abreast of the new requirements implemented in their home countries, in the countries from which they source raw materials and inputs as well as in the markets they intend to target for their exports and adjust their policies, processes and operations accordingly. In addition, in view of the TFA's call for automation and modernization, companies will need to ensure that they have also instituted the necessary internal electronic protocols, such as the ability to submit trade documents and the payment of duties, fees and taxes electronically through newly established single window processes.
Melissa Proctor is a Shareholder with Polsinelli, P.C. With significant experience in the customs laws and regulations, export controls, economic sanctions, and international trade, Melissa is committed to understanding companies' operations and providing assistance geared toward helping them reach their specific business and operational goals. She may be reached at (602) 650-2002 or via e-mail at email@example.com.
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